Keeping people and society safe
Saab's Annual and Sustainability Report 2019

Annual Report 2019

CEO Comment

A unique position for continued growth

In October, Micael Johansson took over as the new President and CEO of Saab. Micael has worked at Saab since 1985 and in the last three years served as Deputy CEO and thereby played an important role in Saab’s development.

Micael Johansson
President & CEO
PDF 9 MB

WHAT POSITION DOES SAAB HAVE TODAY?

For several years, Saab has been making investments to guarantee world-leading products to the market. In doing so, we have strengthened our market position by establishing a broad international base with development and production in a number of countries. These investments have helped Saab to greatly increase the order backlog and facilitated ongoing growth. This has included contracts for major systems as well as what we describe as small and medium-sized orders. With a strong product portfolio, established markets and cutting edge technological expertise, Saab is uniquely positioned for further growth. With a clear focus, we are taking new steps forward every day.

WHAT HAPPENED DURING THE YEAR ON THE BUSINESS SIDE?

Saab has continued to win business. Finland’s choice of Saab as combat system provider and integrator for the Squadron 2020 programme, the United Arab Emirates’ decision to purchase two additional GlobalEye aircraft and the contract to support the German Army’s combat training centre (GÜZ) are three good examples of this. Order bookings during the year amounted to SEK 27.2 billion and at the end of 2019 the order backlog was SEK 93.3 billion, of which 69 per cent are orders outside Sweden. Our order backlog is now 2.6 times larger than our sales.

INNOVATION IS IMPORTANT TO SAAB. TELL US MORE?

One important thing we decided during the year is to make the portfolio, which is strongly tied to innovation, a focus area in the strategy. This is not a change in our strategy, but rather a sharpening. It means focusing our R&D investments on the parts of the portfolio with the greatest potential. Our portfolio contained over 600 products at the start of the year and we realised that fewer products would free up resources that can be invested in core areas that generate volume today and in the future. We have decided to eliminate products that have reached the end of their lifecycle and do not have synergies, such as technologies or expertise that fall outside our core areas.

In a changing world distinguished by rapid technological development and tough competition, Saab has to constantly stay a step ahead. We do so through continued investments in R&D. In 2019, we invested 21 per cent of sales in R&D and we have been successful at further developing and improving our products and converting new technology into products and systems.

COST EFFICIENCY IS A COMPETITIVE FACTOR.
HOW DOES SAAB WORK WITH THIS?

During the year, we reached several milestones in our major development programmes. Examples include the launch of the second Gotland-class submarine, the maiden flight of Brazil’s Gripen E and that GlobalEye flew for the first time to Dubai. Saab continued during the year to improve efficiency, which was initiated in October 2018. Part of this has been working with the portfolio, but we have also digitised internal processes, increased efficiency in the marketing organisation and re-evaluated the number of consultants and personnel needs.

Saab is an innovative and cost-efficient company, but we continue to work internally to ensure that we remain an attractive supplier and partner.

HOW DO YOU MAKE SURE THAT SUSTAINABILITY IS INTEGRATED IN THE BUSINESS?

We at Saab think and act long-term in all our decisions. Our agreements stretch for 10, 20 and even 30 years. It is important therefore that every part of the company rests on a principled foundation. This is essential if we are going to maintain long-term relationships with the governments that buy defence equipment from us. We are convinced therefore that high ethical standards and responsibility in our operations are also critical to long-term profitability. All employees contribute to Saab’s development by acting responsibly and in accordance with Saab’s values and Code of Conduct. Three particular areas of importance are the rules and internal processes on anti-corruption, information security and defence exports. During the year, Amnesty International published a report on the defence industry’s responsibility for human rights in connection with exports. Amnesty sent letters to 22 defence contractors from 11 countries and Saab was one of eight companies that chose to respond since we welcome a dialog on these complex issues. We are continuously developing in the area of sustainability and the UN Global Compact’s principles for human rights, working conditions, the environment and anti-corruption are an important base.

WHAT IS YOUR FOCUS GOING FORWARD?

Saab is growing and we will continue with that. Growth is good for Saab, but it also benefits our customers, not least Sweden and its defence capabilities. During the year, sales increased 7 per cent to SEK 35.4 billion. Operating income rose to SEK 2,937 billion. This represents an improvement in the operating margin, which amounted to 8.3 per cent. Our aim, as already announced, is to continue to improve the operating margin – the 10% target will be reached. We will also continue invest in R&D and marketing to secure Saab’s long-term position.

ANYTHING TO ADD IN CONCLUSION?

Saab was founded to support Sweden’s defence capabilities and that remains our core mission. Being able to contribute as CEO to this work, together with my very talented colleagues, is a great responsibility but also stimulating. I want to especially thank all of Saab’s employees, who with their talents, engagement and ambition contributed to our success during the year. In addition, I would like to conclude by saying that sustainable long-term improvements are key for Saab. We are now entering the delivery stage of several major programmes, where the working capital Saab has built up will be put to use and contribute to cash flows, capital efficiencies and improved returns. I feel that Saab has a unique position for continued growth, and that we will use well.

Stockholm, February 2020

Key Figures

Saab as an investment

Saab’s strong growth in recent years has been supported by conscious choices in focus markets, international partnerships, and research and development. This has laid the foundation for a unique position, as Saab is entering a production and delivery phase and focus is on cash flow. Read more in the Annual report 2019.

Organic growth

%
6

Operating margin (EBIT)

%
8.3

Share of female managers

%, globally
25

Adjusted operating income
and operating margin

MSEK

Order bookings
and sales

MSEK

Saab's Annual and Sustainability Report

Download report
PDF 9 MB

A strategy to support our goals

Saab’s strategy is based on four priority areas

Market

Saab is active in a constantly changing market and has to react quickly to stay a step ahead. The focus is on a number of selected markets and areas where the company already has a strong position to build on for future growth.

Innovation

Only by constantly challenging, questioning and refining new innovations can Saab stay on the forefront and remain a leader in the development of cost-efficient systems and products. For this, Saab needs skilled and engaged employees with a diversity of perspectives.

Portfolio

Saab has broad expertise in military systems and can also offer competitive systems in civil security. To ensure future profitability, the company works strategically and long-term to further sharpen its portfolio. The goal is to concentrate development in product areas that give customers the most value.

Performance

High efficiency and short lead times are essential for Saab to meet its customers’ needs and to compete in the market. The focus is on fulfilling current commitments and continuously work to increase efficiency, not least with the help of digitisation.